A thinktank has proposed a major change to the state pension system, allowing younger people to receive the first year of their state pension as a lump sum. The Social Market Foundation (SMF) suggests this 'transformative' move, called the Citizens Advance, would be worth £12,548 at current rates and would be available only to those with 10 years of National Insurance credits.
Targeting the 'Bank of Mum and Dad'
The SMF argues that the policy would provide an alternative to the 'bank of mum and dad' for 18 to 40 year olds struggling to buy property, pay off student debt, or afford to start a family. According to the thinktank, the approach would be transformative for younger generations facing a crisis of opportunity.
Jamie Gollings, Deputy Research Director at the SMF, stated: 'Britain is facing a crisis of opportunity. Whether you can buy a home, pay down debt, or start a family increasingly depends on the wealth of the parents you were born to – not the work you've put in. The Citizens Advance changes that. It's not a handout – it gives younger people access to capital they've already earned, at the moment in their lives when it can make the biggest difference.'
Cost and Eligibility
The policy would cost £1.3 billion in the first year, depending on eligibility criteria. The SMF suggests that spending would be recouped from savings to the pensions system and economic benefits. Under the proposal, individuals who opt in would have to retire one year later in exchange for receiving the lump sum.
The SMF report notes that over the next 20 years, £5.5 trillion will be passed down by the baby boomer generation, but only a third will benefit from such inheritance. In 2024, the 'Bank of Mum and Dad' provided almost £10 billion, with 52% of first-time buyers receiving family support to purchase property.
Public Opinion and Concerns
A survey by the SMF found that 54% of 25-40 year olds were in favour of the idea, with only 6% against. A majority indicated they would take the Citizens Advance, with debt repayment identified as the most popular use of the cash boost.
However, Rachel Vahey, Head of Public Policy at AJ Bell, highlighted potential downsides. She noted that while the proposal could deliver a much-needed cash boost, it would mean having one less year of state pension income in later life. Vahey suggested that young people might be better off building their own retirement pot through workplace and personal pensions rather than relying on a benefit that is likely to change before they retire.
